why you should REALLY support brokers

BrokeRage

neas wrote: »

Im not a mortgage advisor but an engineer so understand simple mathematics... I can write my own code in matlab excel and maths is pure maths. Your example depends on a number of factors:

1. Are you intending to keep the fixed rate for 5 years or not
2. If not then its basically a question on whether the extra 500 pound fee will be negated by the extra 0.1% interest rate over a 5 year period on the 200k mortgage.

Although you haven't stated enough information for me to calculate this... because i don't know the set repayment rate (i understand that fixed force you to a maximum repayment and a 'usual' figure included over the 25 year period. Note: I can gain this figure from a price comparison website...

I can't calculate with a 100% accuracy because you have omitted this amount... obviously as you pay off more of your mortgage the interest paid back will drop slightly. Taking a 'dumb' look at it for arguments sake and say it was a interest only mortgage then:

Then if you were to keep the 5 year mortgage for the fixed term and not incur a charge then the first scenario would be better by the tune of 500 pounds.

But for the price of 500 pounds you could protect yourself if you were to move. And 1% drop per year on 200k is alot... It be an interesting choice to way up.

But i understand these factors... unless theres some risk analysis you guys do on a guys job being available or probability that the client has to move or other things happen in the 5 year... not sure what im missing oO.

As a FTb waiting for the crash with a 20k deposit saved aiming at saving 30k in 1.5-2 year times I do not forsee myself needing a mortgage broker as it just adds to the cost.

Lol...it wasn't a test, Neas, it was meant to show that it isn't simple, that's all. Personally, I would advise the second choice as it is difficult to think 5 years into the future. All sorts of things could happen in that time, especially with a single first time buyer (if you are single). Redeeming the deal in year four would be £6,000 more for the first deal (a touch less on a repayment mortgage, but then the monthly cost differential is less). Most mainstream deals are "Portable" so it may be possible to move both deals to another property. Then you have the issue of what each lender does if you were to port the deal and increase the size of the mortgage.

You said: "(i understand that fixed force you to a maximum repayment and a 'usual' figure included over the 25 year period." I can't comment on that as I don't know what you mean, but I think it indicates a lack of knowledge of the concept involved in fixed rates (although I apologise in advance if that is not the case).

You should re-read HelpWhereIcan's post at 11.10 am today as well. Up until this month, by the way, it did not add to the cost using a broker (and still doesn't if the most suitable deal pays commission).

Most of what Conrad says is nonsense, frankly, except that he is right about some so-called brokers who don't have a decent product offering, either through being panel-driven and having "Sole-supply" deals on protection (higher-priced with higher commissions) or are inept through lack of knowledge, experience and training.

The best way to get a mortgage is through a good broker. I pay a decorator to paint my house, not because I can't do it but because he will do it better, faster, more neatly and I can complain if he mucks it up. It frees up my time to earn from my own skill-set or to have some well-earned time off. If he did it for free, I would be even happier!

Over 90% of my clients return for subsequent mortgages and they include some extremely bright people. If you want to sort out your own mortgage as some kind of hobby, feel free. The main reason I am spending time on this thread is to inform those who wish to know that there is a lot of help available from brokers with good reputations.

BrokeRage

Conrad wrote: »

Sorry Mamma, I didn't wish to be offensive.

Believe me I worry all the time now as even though I thought this was comming, it really is severe so it affects us all.

I wont change my mind though that many brokers are inept salespeople.

My business model is not superior, no way, I wish it were! I just do not like the way brokers attract punters with thier 'free service' and conceal thier true intention which is to sell insurance.

That's a pretty negative view of the world, Conrad. I sell insurance to provide a safety net for the client and to subsidise the free advice I provide on the mortgage (same thing, but said nicely). I always use a combined IDD but always stress that it is not a condition of my advice that they buy any insurance. Having said that, insurance is another area where clients can trip up dramatically, such as with long term disability cover (PHI), so you are correct in saying that it needs to sold in a competent manner.

Kez100

My mental barrier would be....

Worrying that once in the cycle of application they would try and sell me cover I don't want and use salesmens tactics to back me into an uncomfortable corner to buy unnecessary cover or necessary cover which is much more expensive than if sourced direct. (I have been there with an IFA selling me an endowment when I was young but wanted - and asked more than once for - repayment. He said all the right things - which have turned out to be wrong - to get me to agree to an endowment and line his pockets but I know he covered his backside with his paperwork and paperwork is proof whereas words are just hear'say. I fully accept the loss was mine but, in learning from my stupidity, I avoid people in the business like the plague now)

I know I could avoid the above by going fee based but then the fee would need to work for me and.......

In my time, since my second mortgage, it has always been easy to pick a decent product from those on the market using Which? guidance and other such reports of deals available at that time. I have never had confusing circumstances - always strightforward at lots of value to loan. I know it became much more complicated of late with millions of deals but we seem to be reverting back to the good old days with a lot less choice out there, so a simpler minefield for a numerate person to wade through themselves.

BrokeRage

Graeme7777 wrote: »

The number of rests doesn't matter, BrokeRage; looking at the formula it seems as if it can accommodate any frequency.

I'm afraid that I have to disagree with you when you suggest that this is mathematics and beyond the scope of an advisor's knowledge. (I can assure you that I am by no stretch of the imagination a mathematician!)

I can relate the experience of meeting an advisor (not bank-based) a few years ago. He seemed to rent his office on an ad hoc basis (nothing wrong with that) so he didn't have a PC to hand. While we were chatting I asked him to work out the results of a few different scenarios and even with the help of a calculator he couldn't come up with any sensible answers.

I wasn't asking him to give me definitive answers that I could "take to the bank", rather just a reasonable estimate of the impact of a few simple decisions.

This example is not meant to cast aspersions on mortgage advisors as a whole, but rather to illustrate the point that I made in an earlier post about advisors needing, in my humble opinion as a non-professional, to add value to borrowers. I don't work in the mortgage or property industries but I don't need to consult an expert to tell me that HSBC offers product X or that Natwest's otherwise identical mortgage is better because it charges a slightly lower APR. With all of the information available to us today we no longer need someone to tell us the obvious.

Instead, I want an advisor to be able to advise me on my choice of products BEYOND the simple comparison of APR, to explain the impact of changing the term or making pre-payments or withdrawals. In short I want you to help me create a "strategy" for financing my home in the most cost-effective and convenient way.

Coming back to my original comments about the calculator, I don't think I'm being unreasonable to expect my advisor to have a very clear understanding of how the arithmetic behind the repayment of a loan works, so that he or she can calculate the impact on my pocket of different ways of financing the house. For example, what happens if I want partially to protect myself from changes in interest rates by financing the house with some mix of an fixed-rate and variable-rate loans. Of course there is no need to be able to do such calculations with a calculator if Excel or someother software is available but I must say that my confidence in the broker's knowledge will increase huglely if I can see that he or she really seems to have a handle on what's involved rather than just punching a few numbers into a mortgage programme.

BrokeRage, I promise that I'm not having a go at you or any of your colleagues with this post. As you can see elsewhere in this thread I am a supporter of mortgage brokers and wish you all well. All that I, as an average consumer with no expertise in the mortgage market (and a mathematical wally!), am trying to suggest is that I think that there will always be a role for expert advisors (especially when times are tough and people need sound advice more than ever). I just think that those brokers who add little value (i.e. just sell whathever they can) to borrowers face a more difficult future.

Now I'll shut up and stop hijacking the professionals' debate.

I hope you'll keep us posted with progress about your campaign.

You are hijacking nothing. I agree with Mortgage Mamma on this one, this thread is primarily intended for public consumption and it is excellent to have this sort of input.

I can only reiterate that, whilst agreeing with you that a grasp of the arithmetical/mathematical concepts involved is a good thing to have, it is more important that the broker is knowledgeable, contientious and motivated by the desire to do their best for the client (including the provision of appropriate insurance cover).

Some of the comments on this thread have demonstrated that the public often do not grasp the value of using a broker, so it is very worthwhile IMHO.

BrokeRage

Kez100 wrote: »

My mental barrier would be....

Worrying that once in the cycle of application they would try and sell me cover I don't want and use salesmens tactics to back me into an uncomfortable corner to buy unnecessary cover.

I know I could avoid the above by going fee based but then the fee would need to work for me and

In my time it has always been easy to pick a decent product from those on the market using Which? guidance and other such reports of deals available at that time. I have never had confusing circumstances - always strightforward at lots of value to loan. I know it became much more complicated of late with millions of deals but we seem to be reverting back to the good old days with a lot less choice out there, so a simpler minefield for a numerate person to wade through themselves.

Completely agree with your reservations Kez100, but a lot of fee-based brokers pocket the commission as well, plus the mortgage procuration fee. I think it becomes rapidly clear if you are dealing with a salesperson or an adviser. The chances are that, the more independent a firm is in terms of mortgage and insurance choice, the more likely you would be to buy products through them (and have the added protection of the right to complain if they get it wrong). I am not afraid to use the word "Sales", but I never force products on anyone. In fact, I rarely chase a client after our initial appointment on the basis that I am not in favour of pressure and they are free to use me if they have decided I can do a good job for them, but free not to if that is what they decide.

Now I am off to mow the lawn because I can't afford a gardener at the moment.

neas

BrokeRage wrote: »

You said: "(i understand that fixed force you to a maximum repayment and a 'usual' figure included over the 25 year period." I can't comment on that as I don't know what you mean, but I think it indicates a lack of knowledge of the concept involved in fixed rates (although I apologise in advance if that is not the case).

Fixed rate deals... have a maximum repayment amount per month... to offset the fact you are getting a lower rate than the SVR. This is why some people with lower mortgages remain on the SVR as they literally shovel all their extra cash to pay off the mortgage before the end of the term.

On a 25 year repayment mortgage the interest is set at a rate and the repayment capital per month is calculated such that you will finish after the 25 years.

I hardly call it misinformation... please tell me if this is incorrect because most of my friends/family cannot overpay their mortgage by more than X pounds a month, thouse that can are on the SVR.

I was merely commenting you didn't provide me with all the figures and I wasn't going to bother calculating the required repayment portion of a mortgage... that would reduce the interest payments over the initial 5 years hence skewing the figure of 500 pound difference slightly.

Im sorry but i hardly think i'm wrong... you trash my understanding but fail to provide any explanation... isn't that a bit silly coming from an expert?

BrokeRage wrote: »

I pay a decorator to paint my house, not because I can't do it but because he will do it better, faster, more neatly and I can complain if he mucks it up. It frees up my time to earn from my own skill-set or to have some well-earned time off. If he did it for free, I would be even happier!
.

As the recession hits home i find you will be doing the decorating yourself... on your spare time off... to save money.

I still cannot find evidence of what Mortgage brokers provide other than providing simplicity and extra cost to the process that could be negated by some thorough research and a deposit saving attitude.

homer_j_3

I dont know if its me but isnt this thread getting tiring?

What is the point of this thread? Can anybody sumarise for me why anybody should use a broker at this moment in time.

I thought I got it but its got lost on me somewhere along the way?

I thought HWIC showed good merits for working but then was told that he shouldn't have to do this and it was wrong.

I thought Conrad had some good points about specialising in difficult cases but then that was rubbished.

I thought I had a point in saying that if we changed the FSA mind to make KFI's accessible through sourcing systems for the direct deals, it would help bring benefit back to the broker - but I missed the point.

So please can someone tell me what I need to say and do to make my service of benefit these days because clearly we are all doing something wrong.

cells

BrokeRage wrote: »

That, by the way, is smug and nasty. It indicates that the vast majority of your cells are located in an area nowhere near the brain!

why are you worried if you offer invaluable services.

i have never used a mortgage broker and i never will. you offer nothing but liar loans for the stupid.

HelpWhereIcan

Thought Kez had a good question that has been missed along the way and, reading back, I felt deserved an answer.

Kez100 wrote: »

Who produces and marks the CeMap exams? Not the FSA, surely.

CeMap is the IFS

http://www.ifslearning.ac.uk/qualifications/courses/cemap.cfm

I have the Financial Planning Certificate (FPC) and Mortgage Advice Qualification (MAQ) from the Chartered Insurance Institute (CII)

Kez100 wrote: »

I am gobsmacked that you don't have an Institute which you become a member of when you qualify. They would be the body to produce you relevant CPD courses.

I am a member of the CII and Society of Mortgage Professionals (part of the CII).

My firm is a member of the Association of Independant Financial Advisers (AIFA) which has a Mortgage Adviser equivalent the AIMA.

I am not special and most who have the qualifications I do have the right to membership of the above.

All offer CPD courses and the FSA's Training & Competance requirements demand all advisers undertake CPD and are subject to annual competance testing and compliance audits.

Kez100 wrote: »

They would be the body who should now be fighting your corner in respect of the FSA'a inequality of rules. They would be the body getting professional advertising out there. And, as importantly, they would be the body promoting links with the other professional institutes.

[rant] You don't know how funny that is :rotfl: :rotfl: Unlike the Law Society, ACCA etc etc, our industry bodies do not defend the profession and choose to heap evermore onerous requirements on small firms often finding in favour of the customer in the complaints process, not through proof of guilt but through lack of proof of innocence.

We have no 15 year stop gap, a lifetime liability for the advice we give... [/rant]


Never mind, just read http://www.ifadu.co.uk/ScalesofJustice.htm for the opinion of a lawyer of the way Financial Services complaints operate

Kez100 wrote: »

If the CeMap exams, for whatever reason, are not producing the quality required in practice (as illustrated by Conrad and HelpWhereICan posts) then perhaps a professional body with further, higher level, exams and - as importantly - professional experience before qualifying is what is required. Sort the men from the boys.

We have those professional exams available through the CII. Time will see more and more advisers taking more qualifications.

When I was an IFA I started the Advanced Financial Planning Certificate and will be re-starting soon, promise.

The problem is the sales focus of larger firms such as banks, Corporate Estate Agents and some large National brokers - not the small IFA/Mortgage Broker who is reliant on skills and service to gain and retain clients.

They focus on numbers leading to a very sales orientated environment. The public demand advice for 'free' and so will not pay fees - even though most firms like mine will gladly work on a fee only basis and refund any commission payable. That is not to say working on commission is bad, just that consumers need to understand how their adviser is being paid and by whom.

The sales culture is the one that gets highlighted - even though it is a small part of the industry. The majority of brokers are one or two man firms with a very loyal client base.

Kez100 wrote: »

You are in a very difficult area when it comes to how the general public perceive you. On one hand you can argue the comsummate advisory professional and join the ranks of Lawyers, Accountants, etc On the other hand, working in what could be construed as sales, you can fall into the realm of Estate Agents, or Car Salesmen. What a huge void to jump!

The IFAs have done a pretty good job, I feel, over the years of managing to dig themselves out of the latter and come much closer 'in perception' to the former - although, while commission sales exist, I doubt they will ever quite make the fully independant section or advisory trades.

The main problem is the fact that the FSA and the CII focus so much on regulation and being seen to crack down on errant firms. Unlike the Law Society etc they do not spend time promoting the services provided by their membership.

The FSA is so reactionary that you only hear of the bad things and not the good work done - such as the fact that CPD and exams have been in place as the norm for well over a decade; something your question evidences you were not aware of.

HelpWhereIcan

Kez100 wrote: »

My mental barrier would be....

Worrying that once in the cycle of application they would try and sell me cover I don't want and use salesmens tactics to back me into an uncomfortable corner to buy unnecessary cover or necessary cover which is much more expensive than if sourced direct.

Things have changed since you were young.

Most brokers will ask about protection and, indeed we have a reulatory requirement to ensure that it is discussed.

Most IFAs/Brokers will leave you alone if you want to source yourself and decline advice.

Most will make sure that you understand the types available and the differences between them. You would be surprised how often I come across an educated person who has done a lot of their own research who thinks that PHI, ASU and Critical Illness are all interchangeable.

Again, being independant for insurances also helps your credibility when talking to a customer. I would gladly charge a fee for insurance advice and rebate any commission to reduce the cost of the policy - but again most people can't see past the fee.